Fear, Desperation and Doom Describe the Housing Market

It has been called foreclosure gate, robo signing, foreclosure fraud or just sloppy paperwork; but no matter what you call it, it’s signaling a new financial meltdown for the U.S. economy. The securitized mortgage debt created in the real estate bubble is being called the “largest fraud in the history of capital markets” by people like renowned gold expert Jim Sinclair.

The big banks packaged mortgages into securities (mortgage backed security) and then sold them to pension funds and investors. The mortgages in these securities had to meet what is called “contractual representation and warranties.” That basically means the bank had to legally be able to prove it owned the property it was selling in the security. Once more, the mortgage applications and appraisals were required to be free of fraud. The “robo signing” is all about creating paperwork that proves the banks owned the property in the “security” and the mortgage was done correctly. In millions of mortgages, the banks either can’t find or do not want to produce the original paperwork with the borrowers signature (promissory note). Now, investors want to force the banks to buy back trillions in mortgage backed securities that have lost value. In a recent interview on MSNBC, Congressman Brad Miller said, “. . . in almost every contract if they (the MBS’s) weren’t what they were contractually required to be, the bank had to buy them back. That’s probably more than they could buy back and we may be back where we were two years ago.” (Click here for the entire MSNBC interview with Rep. Miller.)

Two years ago, Treasury Secretary Hank Paulson warned Congressional leaders we were just days away from a complete “meltdownof our financial system, with all the implications here at home and globally.” I think we will be getting to that point again and soon. Sinclair says, “Securitized mortgage debt is going to be the final shot that kills all kinds of financial entities in the Western world.” (Click here for the complete Sinclair post at JSMineset.com.)

Some in federal and state government are calling for a moratorium in all foreclosures across the entire country. CNBC recently reported, “40 States to Launch Probes Into Foreclosure Mess.” The story goes on to say, “The attorneys general of up to 40 states plan to announce soon a joint investigation into banks’ use of flawed foreclosure paperwork.” (Click here for the complete story.) Wall Street is sending up warning flares that the economy could be damaged even more if foreclosures are stopped. (Many banks have already stopped foreclosures in some states.) According to a Reuters story, “The Securities Industry and Financial Markets Association said foreclosure processing mistakes should be fixed but said dramatic nationwide action could unjustly impose losses on the investors who help provide credit to the $11 trillion U.S. mortgage market. “It is imperative…that care be taken in addressing these issues to ensure that no unnecessary damage is done to an already weak housing market and, in turn, that there is no further negative impact on the economy,” SIFMA Chief Executive Tim Ryan said in a statement.” (Click here for the complete Reuters story.)

The White House is also against a moratorium on home foreclosures because it is afraid of “unintended consequences” for the residential real estate market. This comes out after the White House said it would not sign a bill (HR 3808) that some say would make it harder for homeowners to fight foreclosure. I wrote about this in a post last week called “Did Congress try to Legalize Foreclosure Fraud?” Now, some are calling into question whether the President will truly Veto the bill. If the President does nothing (which is the essence of what is called a “Pocket Veto”), it might become law anyway. (Click here to read more on this story.)

According to independent analyst Reggie Middleton of BoomBustBlog.com, the housing market and economy are headed for another crash. In a recent post, Middleton says, “The robo-signing mess is just the tip of the iceberg, mortgage putbacks will be the harbinger of the collapse of big banks that will dwarf 2008!” Middleton goes on to say, “This is what is truly at stake – the United Statesis now at risk of losing its hegemony of the financial capital of the world! Why? Because when we had the chance to put the injured banks to sleep and redirect resources into new productivity, we instead allowed politics to shovel tax payer capital into zombie institutions as they turned around and paid it right back out as bonuses. As a result, significant capital has been destroyed, the original problem has metastized, and the banks are still in zombie status but with share prices that are multiples of the actual values of the entities that they allegedly represent – a perfect storm for a market crash that will make 2008 look like a bull rally!” (Click here to read the entire Middleton post. It is a good one!)

The latest housing scandal has been with us for awhile. The bailouts of the 2008 meltdown just papered over the near financial collapse with printed money from the Federal Reserve. This did not address the real problem with the banks, which is enormous debt and leverage. The government just painted over rust, and it’s starting to show through again—only this time, even worse.

About the Author

Greg Hunter

Greg is the producer and creator of USAWatchdog.com. The site’s slogan is “analyzing the news to give you a clear picture of what’s really going on.” The site will keep an eye on the government, your financial interests and cut through the media spin. USAWatchdog.com is neither Democrat nor Republican, Liberal or Conservative. Before creating and producing the site, Greg spent nearly 9 years as a network and investigative correspondent. He worked for ABC News and Good Morning America for nearly 6 years. Most recently, Greg worked for CNN for shows such as Paula Zahn Now, American Morning and various CNN business shows.

Comments

Robert10/13/2010 •

And still nobody has gone to prison for their role in the destruction of our economy. Martha Stewart was sure made an example of back in the day although her crime was no where near the magnitude of what the banksters caused.. These days it seems the kind of behaviour that brought our economy to where it is today is considered worth getting a bonus for. Infact in a recent article it said the bonuses this year exceed last years..

How can the perps of this fraud get their just deserves when just about everybody in Washington is getting their re-election campaign funds from the very organizations and individuals that caused this mess.

Are laws, policies, statutes and prison just for us little guys to have to abide by and be fearful of? Kind of looks that way. Look at the example congress is trying to make about some jock using steroids and lying to them.. Hell weve seen people in high positions downright refuse to be interrogated for possile wrongdoing and some refuse to be interviewed under oath and get away with it.

The latest Ive heard is some AG is seeking a civil suit against the bank CEOs that went under but that hardly seems harsh enough for the destruction that many in the highest levels of decision making have brought to our nations economy.

How can we as a nation tell other nations be like us when the topic of this thread is about the criminal actions that some of the most trusted people in our country has brought not only to our nation but also to the world economy.

Something is terribly wrong in America and the people in charge of fixing it take money in the form of campaign donations from the very people that caused the problems.

How’s anything going to change? When did lying, cheating and stealing become an admirable quality? What are we teaching our youth?

Isn’t it the lack of enforced regulations that caused this mess and now we have a whole new crop of candidates running on a platform that government is bad and less government is better. Hasn’t what were living through shown us that lack of enforcement of laws and regulations is what got us to this point? We have a political party in America that claims government is the problem. What do you want, anarchy. When did laws, regulations and policies become a bad thing? It’s really getting crazy out there.

No kidding, nobody has gone to jail!!! And get this, Wall Street Pay will hit another record this year!!!!!!!! Fraud and rip-offs are what they are good at!!!! Thank you for posting your comment here.
Greg

I agree sir. The Banks OWN washington. Just like Mr. Celente said the other day, you havent seen true criminal lawless lawmaking until you see that washington is OWNED by 1. the banks…hence the bailout and coming 2nd bailout… 2. the insurance companies….hence obamacare…. 3. The pharmaceutical companies…hence fda approved drugs are now all over the tv for killing people and leaving others retarded…..4. The alcohol companies….hence alcohol…even after ruining untold families and causing untold premature deaths is not just legal, but commercials are run every 10 seconds showing how great and funny it is to be drunk. It is completely out of control. Love your comment too sir.

Hello,
I would like to know if there is anyway to drain the $1200 Trillion in counterfeit paper derivatives et al?
Does every entity involved in the scheme simultaneously write it all off or what?
Are we going to suffer extreme systemic collapse everywhere or a measured 60 year Kondratieff cycle?
What kind of jobs do the boomers grandkids get? (The grandkids being born have just surpassed the boomer highest birthrate figure).
What will food cost when gold reaches US$50,000 oz?

Will the AUS$ expand its differential with the NZ$ to 1.50 from 1.30?

What occurs that the NYSE will close its doors and no longer exist . . . . ?

Note that my last comments to the previous Hunter article mentioned silver going to $350. I may be off one zero – it might go to $3500 oz if it maintains the 1:15 ratio gold:silver. Silver being rarer would increase the price considerably and be more rationale at $3 500 oz with gold at US$50,000 oz.

Any other visionaries out there? Let’s compare notes. Greg has great insight and ability to pull facts together and draw out for us what is being played on the big stage . . . I am looking at what is forming between today’s news and the final outcomes so we can all prepare even better.

Even I can see we are headed for a crash but you offer great insight along with revealing and probing questions. Now if you can see that this site will continue to grow I’ll be happy! Thank you for commenting. I look forward to reading your stuff on any subject.
Greg

Once again the sheeple will be ill served by the fourth estate and the rest of government. This will still come crashing down as the only way to fund any bailouts, which are coming, is on the backs of workers. The problem is fewer and fewer are working and fewer still will remain employed. The USA will enter a period of currency isolation similar to that of the Soviet Union after WWII.

The real outcome will be the enrichment of brokers and investment bankers, who will flee, and the impoverishment of the rest of us. It is difficult for the population to imagine what is going to happen as long as the TV works, the XBox and Wii are powered, and the EBT cards are refreshed.

The wailing’s of the bankers are pathetic but will be heard. These criminals, for that is what they are, will skate. It’s time to take our medicine as bitter as it will be.

Greg, I have been following (and enjoying) your posts since you began USAWATCHDOG.COM. You have always been a clear voice in the troubling times. And today, once again you are unfortunately right on the money (or maybe I should say lack of it). I am afraid for this great Country. Bad times are ahead.

Part of me is astounded at the rampant fraud, lies, and irresponsibility of the banks, the regulators and the Whitehouse (both current and previous incumbents).

Another part of me sees nothing unusual, just normal human behaviour manifesting itself as it always does at the peak of a credit boom – with gay abandon, recklessnes, and no care for morality or common sense.

I think both views are true, but I prefer the latter, more charitable view, the inevitability of which at least makes me less angry.

After reviewing the market for two months as part of my internship and compiling data, people with property for sell(condos/apartments/houses) in Boone NC are finally starting to wake up and lower the price. I saw 8-10% drops this week in property. There is one property now priced at 35% of tax value.

“When did lying, cheating and stealing become admirable qualities?”:
IMHO it really took off during Reagan/Bush. Organized crime got into the highest echelons of govt during those years and for letting them use Arkansas for drug running, Bill Clinton was awarded the presidency. From that point on, the U.S. has been the target of ever more brazen forms of all-out looting. After the S&L scam came off so
lucrative, sights were set higher and higher. Now the pension funds have been looted and the next target will be IRA’s. These psycopath
crooks also sold thier fraud to the rest of the world, but unlike the U.S. sheep citizenry, they are going to do something about it. They are negotiating (according to Max Keiser, etc), to get oil sales off the $US. After being made fools of by our organized crime govt/bank
thieves, who can blame them. Are guys like Max Keiser, Jim Willie, Jim Sinclair, etc. just screaming morons? I don’t think so/they’ve been screaming about mortgage fraud for years. Maybe they know what they’re talking about.

Gary B,
The situation and the economy are sick. This will hit most Americans like a pallet of bricks dropped from a thousand feet. They will not know what hit them when the market crashes the next time. Thank you for the info and comment!
Greg

John Bedard Said:
“It is difficult for the population to imagine what is going to happen as long as the TV works, the XBox and Wii are powered, and the EBT cards are refreshed”.

And this is exactly the problem. Add to that list “as long as the employed have their jobs”.

People have no clue what’s about to hit them. Two of my co-workers just bought houses. One had to empty out his 401K to get the down payment. The other hasn’t sold his old house yet, but he bought another one. He works, but his wife has been laid off for one year and hasn’t been able to buy a house.

99% of Americans don’t read blogs like this one. They’re watching American Idol, the Chilean miners being rescued and that’s it. Unless their unemployed, things are still relatively good.

Just to prove your point i brought one of these posts to our corporate manager here at THE ONLY PLACE YOU CAN BUY A FREIGHTLINER PART IN THE CITY OF HOUSTON….and he literally laughed at the predictions….that was two years ago….guess what….he aint laughin now.

I think it was Calvin Coolidge that stated, “The business of America is business.” The type of business is tax revenue enhancement.

Every boom aka bubble increased the tax revenue stream. These monies have been used to silence the children after a period of screaming, “I want a cookie.”

I would contend that the democrats are mommies. After a period of childish outbursts from the citizens, they cave in and give out the undeserved cookies. Republicans act like the father. Grumble about the costs, but for the sake of the unholy marriage, they look for a means to pay for the increased cost of the ever growing demands for cookies.

From my childhood in the 50’s, I was taught that a home is an investment. This is fallacy #1. Homes are endless money pits barely better than a boat. Only the illogical would claim a declining asset is an investment. Inflation is the driver for increased home prices. But we bought into the scam. Increased demand based upon purely emotional reasoning propelled the costs above and beyond true costs.

So with this demand, the desire for increased tax revenues and silencing the children, the nation permitted and blessed this mess.

So now we are faced with bad paperwork stemming from CDO’s and all thier spawn. The inability to foreclose ties up revenue. But foreclosing puts the children on the street and exposes the fact that the cookie jar is empty. It’s a classic case of “damned if you do, damned if you don’t.”

The possible upside of the moratorium is; inflation will reduce the dollar cost of the losses. We do face the prospect that the losses might result in increased bank failures. However, that is a fallacy. We have FDIC to cover depositor losses ( just print more money) and the failed bank gets to enjoy what is best described as a hostile take-over. We just replace one empty cookie jar with a larger empty cookie jar.

Of course the children will scream about banking profits and bonuses. They will clamor for increased taxation. None realize that corporations make profits from goods and services sold to the child. So here we have the children screaming, “TAX ME MORE.”

Here’s the choice, attempt to protect the cookie jar or tell the children, “No and that’s my final answer.” Next month’s mid-term election will tell the tale for the next two years. My bet? The more things change, the more they stay the same. We must protect the cookie jar at all costs. To bad the “Law of Unintended Consequences” is not just a good idea, but is the law. We are in for unintended consequences no matter what the choice.

Predictions are just the logical outcome of a series of choices. The choice will be to protect the cookie jar. The children will attempt to grab the jar. It will fall off the counter and break exposing it’s meager crumbs. You think the children are a problem now? We ain’t seen nothing yet.

We seem to have forgotten that the can we are kicking down the road is empty. Instead we have focussed on the dents. By and large, the banking industry is empty. It lives on only by a steady influx of digital money created out of thin air. “Just close your eyes and pretend it is an oatmeal raisin cookie.”

The banks will be bailed out of this mess. The bankers will get their Christmas bonuses and the poor minimum wage robo-signers will be hanged for forging signatures and signing documents they would not have understood even if they had read them.

I wish the you know what would hit the fan, the graft and corruption has to stop.

Hi Greg,
I’ve been reading your material for quite a while, as well as Max K, Paul Craig Roberts, shadowstas and the like. What all of you are saying makes sense to me. People say, buy silver and gold, gather food, get ready. Fine, I have no problem with that. It seems to me though, if the SHTF the way you all say, there is no preparation. If 90% of the country has their money totally wiped put. It seems to me, someone will take what I have, total chaos.
I’m watching the history channel right now on the Dark Ages. When Rome was over run the whole area was wasted, it was luck if you survived. Is that what i have to look forward to, Luck?
Can an average 51 year old man in Denver really prepare for what’s going to happen in the next few years?

Greg, please alert Americans when checking where their note payments are going,watch out because MANY OF THE WEB SITES ARE RUN BY NONE OTHER THAN “SEIU” Obamas buddies! Why,I don’t know,but it smells a bit Fishy to me! Crooks stick together,but just like Jim Sinclair said, when the SHTF, Wall St will roll over on each other. JPM & others are now known to hired people that had no experience in any form of forecloser or banking to process paper work to speed up the rates of kicking out people from their homes,even those that had paid them off many months ago,but still the bank they made the payments to could not produce a TITLE! WHAT A FUBAR! GOD HELP OUR PEOPLE & I HOPE THE BANKSTERS DO NOT RECEIVE A DIME IN ANY BONUSES THIS YEAR & THEY DO CLAW BACKS ON ALL OF THOSE INVOLVED IN CREATING,PROCESSING & SELLING MBSs & DERIVATIVES!These CEOs COULD FLEE AT ANY TIME,THEY SHOULD NOT BE ALLOWED TO THE NATION,PERIOD!

Also,those of you that have a common name,please check your credit report ASAP, I was contacted 10,12,2010 by a collection service, there is 3 other people with the same name that I went thru school with,all of us live in the same county,same age,same zip code & after checking there is 47 more in west Tn that has the same name! This happen be for in 1999,but it was in S.Cal where I had a large savings account at the Navy Federal Credit,I wanted to transfer it but was told I had died & my money went to the family members, it took me 8 months to prove that I was alive & to get my money sent to me,so those with common names beware,SMITH,JONES & ON & ON THIS FUBAR GOES!

I say bring it on Greg. There is every reason to fear the impending disaster. Some great mind once said (and I forget who) that courage is not the absence of fear, it is the management of fear. Quite honestly, I think my life would be easier and more fulfilling if I got to stay home all day, defend my family, work in my garden, etc. then working my tail off all day for the slavemasters and their fake money. The quicker T.S.H.T.F., the sooner I lose my status as a slave to fiat currency. Of course, I have less to fear because I have already done some preparation. I have been telling all my friends and family that exactly this was going to happen for years, and they all think I am crazy because I have stockpiled food, seeds(heirloom seeds, of course), guns, ammo, more ammo, silver, generator, pumps, antibiotics, etc. I would rather have this stuff, be thought of as a crazy person, and everything goes back to normal than to assume that everything will go back to normal and not prepare. For all of Greg’s readers, it is a miracle of God that you can still buy real things with U.S. dollars, do it while you still can. I still however believe bullets will be more valuable than gold. There is a definite reason our forefathers worked so hard to protect our right to bear arms. Everyone has to realize that once it is revealed the cookie jar is empty, the entitlement checks will stop. That, my friends, is when the rioting begins.

When is it coming? I keep telling you that the average American worker is still clueless. Talked to someone at work today and their response was: “The stock market is up and my stocks are doing well. So, I don’t what you’re talking about”.

What I’m beginning to detect is cockiness. Too many Americans are still too cocky. They don’t think it will affect THEM. Why? because they have college degree’s, they’ve always managed to get jobs, etc, etc.

I am just familiarizing myself with the concept of fractional reserve banking and if that’s what banks were doing – i.e. creating money from thin air and then lending it out at 10 or 100 times what they actually had in cash on hand, then there is no way any large bank in America is solvent.

HI Greg, I can not agree with you more. The hope to listen to you on the Brad and Britt show WZTK FM101.1 in a few weeks. They gave out your website again today. I quit my job at a small town newspaper to start doing P&P work for a major player in the P&P field. My first contractor characterized the mortgage bubble as a “scam” The banks only loose money on paper but actually make cash on the backend with a paper tax deduction as the kicker. I believe the banks see this as a new revenue stream with HUD left holding 75% of all mortgages while the banks adminster the foreclosure process. I myself was sent to a house owned by a realtor who was actually in bankruptcy proceedings. I secured the house with doing damage and changed one side/back door. The problem is the mortgage servicing sent the workorder by mistake. I was contacted by the realtor/owner when he found out that I had changed the locks. He had the sheriffs department investigate.I had left documentation and sign in sheets on the counter and posted a notice by the mortgage company as SOP. I covered my butt and had the company send me emails that they had mistakenly released the workorder. I do not know what happened in the end. The owner would not allow me to return to the property to remove the locks. I can see both sides in this mortgage scam where the investors were sold paper and the mortgagors who were sold bad loans or should not have had a loan. I had one property where the entire house was actually located on the neighbors lot. And another where four feet of a 2-story brick house is on the neighbors lot.
Yes, the worse is yet to come. However, I hear from conservatives is that on Nov 3 all jobs will magically reappear and we will have won our country back from its self?

Mitch,
Thanks for your comment and I agree the Republicans do not have the answer on fixing this mess. I think only a real financial debt wash out will do ,but that will be very painful for America.
Greg

Due to relocation (job transfer) we need to sell our home and buy one in the new city (or rent). It is only 100 miles away so we have “flexibility”. Would we be better off selling our home quickly (at any cost) and then renting till things settle down….or….buy a house in the new city at a low price and hope the housing market turns around and own two homes until we can sell ours at a reasonable price? We are both a seller and a buyer and are not sure what to do!

Mike,
Do not go long on 2 houses. You are kidding yourself if you think housing prices will come back to the levels they were. It will take many years and we are NOT at the bottom–not by a long shot. Sorry for the bad news.
Greg

The Fed and their complicit banks must be abolished to save the Republic!

It’s the only thing we can do. CRASH THE BIG BANKS NOW “Too Big Too Fail” apparently means “Too Big To Succeed” and “Too Big for their own Wallets”

The sooner the better. Why don’t we ask a 3rd grade math student what he thinks? The real problem is that a politician who could do something about it has his own mathematical challenges about healthy economies. “Bite the hand that feeds him” (by indicting Banksters), or make millions putting children in the streets for power and profit.

Apparently ALL politicians are going to make the same choice over and over again. They have always sold the souls of your children and their future and they always will. Take the big Banksters out of the picture. Build a local banking system that cares about its community and helps it thrive instead of sucking the life out of it by bribing and fixing the entire system for itself, taking us all of a cliff with it.

Crash all the big banks now. Create new local Banks only = No more Wall Street Banksters.

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Greg is the producer and creator of Greg Hunter’s USAWatchdog.com. The site’s slogan is “analyzing the news to give you a clear picture of what’s really going on.” The site will keep an eye on the government, your financial interests and cut through the media spin.

USAWatchdog.com is neither Democrat nor Republican, Liberal or Conservative. Before creating and producing the site, Greg spent nearly 9 years as a network and investigative correspondent. He worked for ABC News and Good Morning America for nearly 6 years. Most recently, Greg worked for CNN for shows such as Paula Zahn Now, American Morning and various CNN business shows.